Case nº A.A.R. No. 883 of 2010 of Authority for Advance Rulings, May 16, 2011 (case R.R. Donnelley India Outsource Private Limited Vs Commissioner of Income-Tax)

PresidentP.K. Balasubramanyan, J. (Chairman), J. Khosla and V.K. Shridhar, Members
Resolution DateMay 16, 2011


J. Khosla, Member, (New Delhi)

  1. The applicant, RR Donnelley India Outsource Private Limited (for short "RRD India?) is an Indian company, provides solutions in commercial printing, direct mail, financial printing, product customization, print fulfillment, forms and labels, logistics, call centres, transactional print and mail, print management, online services, digital photography, colour services. It also provides high end support services to the customers identified by its associated enterprises. It further provides data capture and processing services, transcription services, online transaction processing, shared accounting and financial transaction services, health care, insurance, advertising and call center services.

  2. The applicant has entered into a data processing services agreement with RR Donnelley Global Document Solutions Group Limited (RRD,UK) effective from 14.11.2006 for efficient discharge of its services to the customers. RRD, UK is a foreign company and is a tax resident of UK. It is engaged in the business of communications management - delivering creative and presentation services, pre-media, print management, transactional print and mail, warehousing, logistics and distribution, and data processing.

    2.1 The services to be rendered by RRD, UK is specified in schedule-I to the agreement with which we will deal in subsequent paragraphs. As per Article 2.2(a) of the agreement, RRD India shall pay to RRD, UK consideration for such services (collectively, the "fees?) based on the invoices raised by RRD UK in accordance with Article 2.2(e) of the agreement. RRD, UK shall issue a monthly invoice to RRD India, setting forth the fees (itemized by service) and any applicable taxes payable by RRD India for such calendar month. Fees shall be paid in full by RRD India within 90 days following receipt of an invoice from RRD UK.

    2.2 In the light of the above facts, the applicant seeks the ruling of this Authority on the following questions:

    (1) Given the facts and circumstances of the case, whether the amount received/receivable by RRD UK as per the Data Processing Services Agreement is taxable as "fees for technical services? having regard to the provisions of the Income Tax Act, 1961 ("the Act?) and the Double Taxation Avoidance Agreement between India and UK ("the DTAA?)?

    (2) If the answer to Question 1 is negative, given the facts and circumstances of the case, whether the amount received/receivable by RRD UK as per the Data Processing Services Agreement is chargeable to tax in India having regard to the provisions of the Act and the DTAA, given that RRD UK does not have a Permanent Establishment in India?

    (3) If the answer to Question `1 and 2 are negative, i.e. the amount received/receivable by RRD UK is not taxable in India, then, whether the Applicant is required to withhold tax under Section 195 of the Act while making remittance to RRD UK?

  3. The Revenue although it filed its comments, was not represented at the hearing. The revenue was given a further chance to file its submissions, in writing, if any, within two weeks from 18.4.2011 but till date it has not filed any submissions.

  4. The learned Counsel appearing for the applicant argues that the applicant provides solutions in commercial printing. No technology is involved. The applicant has a contract with a bank in UK for data capturing and processing. It is basically converting applications into readable form. The bank has an agent with the applicant. The applicant has contract with RRD UK for scanning and then sending the information to India. The service description given in schedule-I to the agreement to be rendered by RRD UK is as follows:

    Ø To receive hardcopy applications from the client and sort the applications as per client requirements (data-wise or month-wise).

    Ø To review the hardcopy applications for basic completeness of details.

    Ø To return the applications to the client which are badly damaged and that cannot be processed further.

    Ø To securely destroy blank documents.

    Ø To scan the unidentifiable applications. Such scanned files to be sent to the client for identification of requisite information.

    Ø To create batch file comprising of 25 applications (other than mentioned above) in each batch (created by application type. To allocate each batch with a batch number.

    Ø To scan each batch of applications using document scanner to produce document images.

    Ø To ensure the clarity of the scanned documents through a quality control check.

    Ø To transmit the scanned...

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